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Selling The SUV Status Quo

"The direct model has been a revolution, but it is not a religion." — Michael Dell, in a memo to employees about Dell Computer's plans to sell PCs at Wal-Mart, as reported in The New York Times

When the little guy gets into the stock market, the saying goes, the smart money gets out. While retail investors are not yet piling into U.S. equities by any means—private equity buyouts and share buybacks have led the more-than-four-year bull market—there are signs that the tipping point might not be so far off. With the Standard & Poor's (MHP) 500-stock index and the Dow Jones (DJ) industrial average hitting all-time highs, the monthly UBS/Gallup Index of Investor Optimism has soared 21 points, to 95.

To be sure, that's still short of the 124 reached when this broad measure first appeared in October, 1996, just months before then-Federal Reserve Chairman Alan Greenspan famously warned of "irrational exuberance" in the market. Nor is it anywhere near the peak of 178 in January, 2000, at the height of the tech bubble.

But combined with an S&P that's up 25% in the past year and a real estate market now in the red, the confidence stat is meaningful. And Mom and Pop might just be ready to log into their brokerage accounts again. Take Hollywood (Fla.) tech consultant Michael Kusens, who retreated to property speculation after taking a beating in the 2000-02 market collapse. "Once I get my money out of real estate," he says, "the stock market might be a fair way to go."

The Dow's runup to 13,600 has been one of the least volatile ever, charging ahead without a single 10% correction. But all that stands to change when retail investors, who tend to chase past performance, climb aboard. As market watcher Donald Luskin says: "When the coach seats on the airplane start to fill up, be prepared for a little turbulence."

Love him or hate him, liberal activist Michael Moore knows how to churn up public opinion. In Sicko, opening on June 29, the 53-year-old firebrand director takes on the health- care industry. Moore talked with BW's Los Angeles Bureau Chief Ron Grover:

What do you hope the film will accomplish?

We need to overhaul the health-care system. We need to eliminate private health insurance companies. Pharmaceutical companies should be regulated like a public utility. Health care is just as much a public necessity as the police or fire department.

Didn't Hillary Clinton fail to change the system a decade ago?

A lot has changed since then. Who do you know who hasn't fought with their insurance company to get something covered? The problem is that publicly traded companies now control health. They have a duty to shareholders. And that means denying claims that will cost money. When I was growing up, it was the cities, the nuns, maybe the B'nai Brith who ran the hospitals. We got good care."

You're being investigated by the Treasury Dept. for taking some 9/11 workers to Cuba, where your film says they got better health care than in the U.S.

The Bush Administration is just retaliating for Fahrenheit 911. These were people who were not getting the care they needed here.

Cheryl Behymer, a partner at national labor and employment law firm Fisher & Phillips, says she advises her clients to proceed with caution to be sure they're not making themselves more vulnerable to charges of discrimination. "You're seeing a physical representation of the candidate, what their race is, their national origin, their age," she says. "That potential applicant might say: The reason you didn't [interview] me is because you can tell I'm a minority.'"

The idea of first looking just at a candidate's qualifications, Behymer says, is to help prevent the filing of a failure-to-hire claim, which can arise if an employer is suspected of discriminating against an applicant who belongs to a "protected class"—a minority individual or an older person, for instance. It helps at this early stage of the hiring process, she says, to keep information about race and age, for example, separate from a candidate's skills and qualifications.

One process Behymer recommends: Have initial résumé screeners omit the video when they send along a candidate's other materials to the manager actually doing the interviewing or hiring.

Like Behymer, Garry Mathiason, a senior partner at leading employment firm Littler Mendelson in San Francisco, says that employers should never require video résumés from candidates. That's tantamount, he says, to asking questions about race or age "that at this stage in the process are unlawful."

But, says Mathiason, "if the applicant decides to send in that information through a video résumé," he doesn't agree that an employer has to avoid it. Companies "do take on some additional, limited risk" by viewing an online video résumé, he says. But they can also gain from assessing certain traits in candidates—"how confident they are, for example." Still, he says, to be safe, "I'd err on the side of including in my interviews all those who meet the job's objective criteria."

Just as Mercedes-Benz's (DCX) Smart fortwo launches a 50-city U.S. road show, gas prices are nearing $3.50 a gallon. That may be one reason 18,000 people have plunked down $99 each to reserve one of the tiny 40 mpg two-seaters, which won't hit dealers till next year. That's almost as many cars as Mercedes plans to sell here in all of 2008.

Success in the U.S. would be welcome news for the company, which is losing money on the impractical fortwo in Europe. Still, initial buzz will not be enough to sustain growth in the U.S. So far, the eagerness of American buyers recalls the presale hoopla that BMW's Mini Cooper had in 2002 when dealers were lining up buyers before the car went on sale. Americans now buy about 40,000 Minis a year.

Smart USA President David Schembri says buyers are reserving fortwos in all 50 states. And unlike the Minis, which range from $17,000 to $30,000 or more for a convertible, these cars (which are two feet shorter than the 12-foot Mini) run from $12,000 to $17,000. "It's the right car at the right time," Schembri says. "The price opens us up to entry-level buyers, and we think the higher-end models open us up to the urban cools."

Gold, long considered by Asians to be lucky and the only sure store of value, is getting a boost from the Chinese calendar. Mainland China snapped up 31% more gold in the opening quarter of this year than last, buying almost 90 metric tons. Officials at the World Gold Council trade group credit the Year of the Golden Pig that began in February: It comes along every 60 years (or 600, depending on the astrologer you consult). The council says current demand is the strongest since the early 1990s, when inflation fears and currency devaluation caused a gold boom in China.

Most popular among those who find it auspicious to buy gold now: jewelry and "lucky balls," small ornaments worn around the neck or wrist. In India, the world's largest gold market, first-quarter demand is up 50%. Indians bought 211 metric tons of gold, now at $653 an ounce. The surging economy gets the credit there.

Given the medical problems associated with obesity, it's safe to assume that overweight workers drive up employer health-care costs. Now, using data provided by nine large companies, Thomson Healthcare, a unit of data provider Thomson Corp. (TOC), has come up with some figures. Among its findings: A severely obese employee typically runs up a tab of $5,695 a year in medical care and pharmacy costs—75% more than a worker of normal weight. Thomson based its calculations on anonymous health-assessment surveys filled out by more than 54,000 employees as part of workplace wellness programs. The self-reported data—on height, weight, and blood pressure—was linked with medical-claims information from the same companies. The incidence of circulatory and metabolic diseases such as diabetes was three times higher in obese workers, who also had more arthritis, back pain, and injuries. Might obese applicants eventually find it tougher to get a job? Says Elizabeth Dudek, a Thomson vice-president: "Prudent employers will have policies to prevent discrimination."

As cable behemoths such as Comcast (CMCSA) compete with phone giants like Verizon (VZ) to wire American homes, each side is betting on multibillion-dollar fiber networks. The old copper phone lines? Obsolete and expensive to keep alive, say major players. To the chagrin of the smaller rivals that lease them, the big guys shut off more of those lines every day.

Welcome to the copper wars. Small-fry competitors like Reston (Va.)-based XO Communications (XOHO), San Jose (Calif.)-based Covad Communications (DVW), and Cavalier Telephone & TV of Richmond, Va., have filed a petition with the FCC to bar the big telcos from shutting off the copper networks as they deploy new, proprietary fiber lines.

The small telcos say that without the old wiring they can't survive, since they don't have the resources to roll out fiber. Many argue that they serve areas otherwise neglected. Cavalier says it uses copper phone lines—goosed with newfangled technology—to offer residents of Richmond and Hampton, Va., a bundle of phone, broadband Internet, and TV service. Those copper lines are leased from Verizon, which eventually plans to shut them down. If that happens, "I honestly believe that we would go out of business," says Martin Clift, Cavalier's vice-president of regulatory affairs.

Big telcos filed 141 "copper retirement" notices with the FCC through March, nearly as many as the 160 they filed for all of 2006. Verizon is the most active, with more than 100 retirement notices—each to replace strands of copper with fiber it says boosts the power of its DSL service to entire neighborhoods.

The big fish argue that their smaller rivals have had years to build networks or seal partnerships. And Verizon, for one, says that where it has filed to replace copper in tiny towns—such as Burgettstown, Pa., and Cherry Valley, Ill.—rivals don't offer broadband. Small telcos "want us to continue this sharing model into infinity," says Scott Randolph, Verizon's director of federal regulatory affairs. "That doesn't make sense." The FCC says it is looking at the issue but that it could take months to decide.

The ad begins as a truck owner tells a friend he wants to buy a new pickup. Over the sound of clucking chickens, the talk then turns to government regulation. "Haven't you heard what Congress is up to?" the friend says, explaining that "they want to set the same fuel economy standards for pickup trucks as they use for cars....When you buy that new pickup, it's gonna really jack up the price."

The 30-second radio spot is part of a campaign by the Alliance of Automobile Manufacturers to rally support against tougher fuel efficiency rules. Kicked off on Memorial Day weekend, the ads—with their folksy, almost grassroots feel—come as Congress considers legislating the first major boost to car fuel economy since 1975. The Senate is poised to examine a bill that, if signed into law, would raise fuel economy standards to 35 mpg by 2020—up from the current 27.5 mpg for passenger cars and 22.2 mpg for light trucks. The AAM's $1 million-plus radio-and-print campaign calls this "extreme" and urges fans of trucks, minivans, and SUVs to tell Congress to vote no.

Groups like the Sierra Club and the Union of Concerned Scientists have spoken out against the ads, which are running in 10 states with a high percentage of light truck and SUV owners. "Automakers are looking into the rearview when we need to be moving forward," says David Friedman, research director for the Union of Concerned Scientists' clean vehicles program. The AAM, which represents General Motors (GM), Ford (F), DaimlerChrysler (DCX), BMW, Toyota (TM), and other carmakers, says it shares environmentalists' concerns but wants to protect Americans' choices. "We want to reduce dependence on foreign oil and address climate change," says AAM communications director Wade Newton. But the Senate bill "focuses on the vehicle," he says, ignoring consumer demand.

Truck-driving farmers aren't the ads' only target audience. "To meet new fuel economy standards, the automakers are going to be forced to make smaller and smaller cars," says a woman in another radio spot, over the sound of children playing. "Why can't they let me make the choice?" her friend replies. "Safety is my first concern." As part of the campaign, an AAM Web site (drivecongress.com) offers links to senators' e-mail addresses as well as toll-free phone numbers for representatives.

It's too soon to gauge the ads' impact. But it's worth noting that SUVs seem to have a solid fan base, even in the face of high gas prices. While small cars make up almost 32% of new-car buys so far this year—up from 21% in 2000—luxury SUV sales have held steady at about 28% over the same period.

What's the one thing you have to take along when you travel for business?

"Ambien. No matter how long the flight is, even if it's only three hours, I take Ambien to go to sleep on the plane." — William McComb, CEO, Liz Claiborne